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Did Badger Daylighting’s (TSE:BAD) Share Price Deserve to Gain 85%?

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One simple way to benefit from the stock market is to buy an index fund. But many of us dare to dream of bigger returns, and build a portfolio ourselves. Just take a look at Badger Daylighting Ltd. (TSE:BAD), which is up 85%, over three years, soundly beating the market return of 16% (not including dividends).

View our latest analysis for Badger Daylighting

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

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During three years of share price growth, Badger Daylighting achieved compound earnings per share growth of 21% per year. We note that the 23% yearly (average) share price gain isn’t too far from the EPS growth rate. Coincidence? Probably not. That suggests that the market sentiment around the company hasn’t changed much over that time. Au contraire, the share price change has arguably mimicked the EPS growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

TSX:BAD Past and Future Earnings, March 26th 2019
TSX:BAD Past and Future Earnings, March 26th 2019

It’s probably worth noting we’ve seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on Badger Daylighting’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Badger Daylighting’s TSR for the last 3 years was 94%, which exceeds the share price return mentioned earlier. And there’s no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It’s good to see that Badger Daylighting has rewarded shareholders with a total shareholder return of 78% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 0.4% per year), it would seem that the stock’s performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

Badger Daylighting is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.